UNDER

ARMOUR
Case Synopsis
BUS 478, D600

Faheem Ali

301199239

Gabriel Ho-Garcia

301174629

Hyunjae Jun

301212559

Parm Bajwa

301183292

Rafael Fontan Porrua

301295134

Salman Saleem

301186907

INTRODUCTION
Organization History
Under Armour was founded in 1996 by current CEO, Kevin Plank. At the time, he was an athlete
on the University of Maryland football team and he, along with his teammates, noticed the
clothing worn under their jerseys were always heavy with sweat. Upon his graduation, he began
the process of creating a solution to this dilemma and thus began Under Armour. After creating
his first set of prototypes, he started to give them to his former Maryland teammates to test,
which gained mass publicity across the USA (Under Armour, 2015).

During the early years of Under Armour, they focused on inner wear for American football
players, which has since then expanded to various sports on a global stage. Today Under
Armour produces innovative performance apparel, footwear, and accessories for all genders
and age. This aligns hand in hand with their mission statement: To Make All Athletes Better
Through Passion, Design, and the Relentless Pursuit of Innovation (Under Armour, 2015).

FIGURE 1: Under Armour Stock Value History

Source: MINT Global: Under Armour, 2015

As can be seen in Figure 1, Under Armours growth since 2005, after becoming public, started
off slow but began to increase starting in late 2009, where their stock value grew by 500% into
2012. The sudden deviances in value in both 2012 and 2014 were due to a 2:1 stock split.
Evidently, from the table above, we can see Under Armours large growth over the past decade,
clearly demonstrating their proficiency as a company.

EXTERNAL ENVIRONMENT
General Environment
Demographic
As an athletic apparel retailer, Under Armour focuses its products and marketing efforts towards
men, women and youth. The amount of resources that are allocated to each group of customers
differs. Initially, Under Armours main source of revenue was from men (Team, 2013). Although
women and youth products were also sold, production and marketing efforts were mainly
targeted towards men (Team, 2013).

According to a Forbes article, Under Armour started to place more emphasis on womens
market as they realized that the womens business has the potential to generate more revenue
than the mens business. In order to implement this change, retail locations were built in close
proximity to well known areas where women tend to shop (Team, 2013).

Socio-Culture
Considering that sales in the United States generates majority of Under Armours revenue
(90.7%), the organization has incorporated the patriotic culture within its products and marketing
efforts. Under Armour does this by manufacturing military and tactical clothing (Armour, Mens
Tactical & Military Gear, 2015). They also provide discounts and promotions that are

exclusively available to US army members and first responders, along with their families
(Armour, Troop ID & First Responder FAQ, 2015).

Industry Environment
Porters 5 Forces

Bargaining Power
of Suppliers

Low

Bargaining Power
of Buyers

Moderate

Threat of
Subs.tutes
Threat of New
Entrants
Industry Rivalry

Produc.on occurs in 14 dierent countries from 27 dierent

manufacturers
The use of mul.ple suppliers allows them to bargain and contract with the
supplier that provides the lowest cost

Building a good reputa.on through mul.ple campaigns on current issues

has developed into superior brand recogni.on
Premium quality of products captures and retains consumers

High

Mul.ple compe.tors exist within the athle.c apparel market

Main compe.tors for athle.c apparel are Nike, Columbia Sport and Adidas

Moderate

Substan.al ini.al investment is required to manufacture product lines,

supply customer demand and market the brand
Other clothing brands have the ability to start manufacturing athle.c
apparel which will take away market share from Under Armour

High

Compe.tors are mainly larger organiza.ons

Larger organiza.ons have greater amounts of resources at hand that can
be used towards eorts in order to capture market share

(Arline, 2015)

Competitor Environment
The major competitors that Under Armour faces are Nike and Adidas. Due to the large scale of
these organizations, greater amount of resources are at hand that can be utilized. These
resources can be used for marketing, production and customer retention efforts targeted at
capturing market share from Under Armour (Arline, 2015).

INTERNAL ENVIRONMENT
Under Armour is defined as one of the most renowned sports firms around the world. Their
brand recognition has improved in the last few years, and Forbes placed them as the fifth
largest sports brands in the world in 2014. Through technology, they have achieved an excellent
quality in their products and are now positioned as the second largest sports retailer in the U.S
market, where they overcame Adidas in 2014 (Germano, 2014).

Core competencies and capabilities

Under Armour is specialized in high-performance products designed for practicing sports in all
kinds of climate situations or environments. Their clothing is manufactured to maintain
consistent body temperature and dry at any level of sport. Their product range includes apparel,
accessories, footwear, and, recently introduced, digital fitness platforms (Under Armour, 2015).

Their core product line is apparel, which they have divided into three different product lines.
Hence, you can find different registered trademarks for each: HEATGEAR for hot environment,
COLDGEAR for cold climate and ALLSEASONGEAR for moderate temperatures.
In terms of markets, their core region is North America, which accounts for 91% of their net
revenues in 2014. Most of their income is generated from the wholesale to national, regional,
independent and specialty retailers (Under Armour, 2015). Despite the previous, they also
account with different direct sales channels such as brand and factory house stores and
websites. At the end of 2014, they had 125 factory house stores and 5 brand house stores in
North America, which were mostly situated in the US (Under Armour, 2015).

Manufacturing is not done in-house, but they arrange it with suppliers from 13 different countries
outside the U.S. This approach enables them to select and create superior, technically
advanced fabrics, produced tospecifications, while focusingproduct development efforts on
4

design, fit, climate and product end use (Armour, 2015). In consequence, they only own a
limited amount of manufacturing patents because most of them are owned or controlled by the
suppliers and Under Armour has no power over them. Distribution, once in North America, is
conducted through logistics providers with primary locations in Canada, New Jersey and
Florida. (Armour, 2015)

When it comes to human resource activities, Under Armour has about 10,700 employees, of
which approximately 7,000 work in brand and factory house stores and 1,260 at the distribution
facilities. Again, most of them are located in the U.S. Until now, they have never had any labor
strikes or work stoppages, which reflects the good relation and compromise between the
company and their employees. (Armour, 2015)

CURRENT SITUATION
Under Armour has showed strong financial performance in FY 2014. The companys revenue
increased at 32.3%, compared to FY 2013. Revenue from North Americansales accumulated to
90.7% of the total. The increase in revenue has been rooted to elevated consumer interest in
performance products. Also, strong brand recognition in the market has contributed to the
increased revenue. Although the revenue from other foreign countries accounted for 9.3% in
FY 2014, the company recorded $288 million, which was $149.7 million greater, compared to
$138.3 million in FY 2013. This increase was attributable to expanded distribution channels in
EMEA and Latin America operating segment (MarketLine 2015).

Currently, the company operates three product categories: apparel, footwear, and accessories.
In FY2014, the company earned revenues from apparel (30%), footwear (44.2%), and
accessories (27.5%) (MarketLine 2015).

In order to increase brand recognition and exposure in more diversified ways, in Feburary 2015,
the company acquired two fitness app makers, Endomondo (open fitness tracking platform) and
MyFitnessPal (health and fitness application). By this acquisition, the company can have more
than 150 million registered users. Also, the company plans to provide e-commerce access via
the apps (Symington, 2015). In July 2015, the company formed a partnership with USA Boxing
for outfitting the entire teams for next six years, including 2016 and 2020 olympic games, in Rio
de Janeiro and Tokyo. Moreover, the company announced the multi-year global partnership with
the National Basketball Association (NBA) in August 2015. With these partnerships, the
company expects to enhance its global brand recognition (MarketLine 2015).

In 2014, the world market size of sportswear was $267 billion, an increase of 4.3% over 2013.
The world market share of Under Armor was 1.6%, 6th rank, which has increased by 0.3%
compared to 2013. In the meantime, the market size of sportswear in North America, which
accounts for 35% of the worlds sportswear market, was $96 billion, an increase of 7.3% over
2013. Under Armour captured 3.9% of the sportswear market in North America, which was 4th
rank, and has increased its market share by 0.7% over 2013 (Euromonitor, 2015)

STRATEGIC CHALLENGES
Current Strategy
Business level Strategy
Under Armour differentiates itself from other athletic apparel companies by using synthetic
material in producing its clothing. They were the first company to innovatively use synthetic
material technology which helps keep athletes cool when the weather is warm and warm when
the weather is cold (Burke, 2011). Its strategy is to find the next generation stars to represent
their brand, and that is why its primary targeted audience is individual athletes and sporting
teams (Thompson, n.d.).
6

Under Armour experienced first-mover advantage in performance sports apparel. They are
second movers in the general sports apparel and footwear sectors. Also, Under Armour
attempts to increase their presence in womens market with the aid of marketing through social
media (Thompson, n.d.).

Corporate Level Strategy

On the corporate level, their strategy is to acquire and partner with college or pro teams since
they are looking to buy rights to sponsor those teams (Soni, 2014). Being a North American
company, Under Armour is increasing their hold on the US market and expanding into global
markets by targeting European regions and big cities in Asia (Soni, 2014).
Under Armour is pursuing a low level dominant business diversification strategy. Their key
revenue source is apparel sales, almost 80%, and the rest of the revenue is drawn from
footwear, accessories and licensing (Soni, 2014).

International Strategy
A big aspect of Under Armours growth strategy is expanding abroad, which also ties into how
they plan to manage competition. Under Armour has been very focused on the United States,
although Europe and Asia provide a big opportunity for Under Armour to continue expanding
(Uabiz.com, 2014). In order to gain control over the European market, Under Armour has
undertaken the largest media effort in Europe. Currently, Under Armour has full uniform
sponsorship deals with 3 teams and 4 individual endorsements in Europe (Uabiz.com, 2014).
To expand globally, Under Armour utilizes a multi-domestic corporate level strategy. Under
Armour tailors its products and services based on local markets, especially according to the
need of individual athletes and sports teams (Team, 2014).

Co-operative strategy
For the purpose of expanding its operations, Under Armour is following Nikes steps by signing
endorsements with sports teams and rising athlete stars. Its recent expansion in Europe by
endorsing with Tottenham Hotspur, an English football team, was a huge step targeted towards
introducing the Under Armour brand within the European market (Team, 2014).

Strategic Challenges
Market Share
As with any company in any industry, Under Armours main strategic challenge is to attain a
larger portion of market share, specifically in the sporting goods industry. Unfortunately for
Under Armour, it is substantially a challenging task as they are competing with two giants in the
industry, Nike and Adidas. Both of these companies have a long history in the industry allowing
them to attain a majority percentage of the market share. This has been attained through their
efficient supply chains, growth of their brand equity, and their ability to create value for their
stakeholders on a continuous basis.
Annual Sales Revenue
(Figures in Billions USD) *

2011

2012

2013

2014

Under Armour

$1.47

$1.83

$2.33

$3.08

Nike

20.10

23.3

25.3

27.8

Adidas

16.4

18.3

17.5

17.9

* At 1.23 EUR to USD conversion rate on December 31, 2014

As showed in the figure above, Under Armour has achieved a constant increase in their annual
sales revenue, but their figures are substantially smaller compared to those of industry leaders,
Nike and Adidas. Although attempting to attain more market share is always desirable, Under
Armour must also view growth as a form of protecting themselves against Nike and Adidas as

there is always the risk of those companies using their advantage to push out other competitors
of the market. There are many ways in which Under Armour can achieve growth, to list a few:
technologically advanced products through R&D, sports marketing, improved distribution network, and a more efficient and effective supply chain (Daigle, Bowen, Dion, & Valentine, 2014).

Global Expansion
Another major challenge that Under Armour faces is their lack of presence in the global market.
Although Under Armour has made an effort to move into other geographic locations such as
Europe and Asia, North America accounted for 93.9% of Under Armours revenue in 2011
(Daigle, Bowen, Dion, & Valentine, 2014). Under Armours limited market plays a large role in
their ability to grow as a brand as they conduct all their work in North America. Their ability to
expand into new regions of the world has been inhibited by the brand equity of Nike and Adidas,
whose global market shares are unparalleled.

A reason why Under Armour has not been able to effectively expand globally is due to their
sport selectivity and their specialized products. Under Armour has decided to focus the majority
of their sports marketing in sports such as American Football and Baseball, where the audience
is almost completely in North America. To help them expand, they should begin to focus on
sports with a larger global presence. Lastly, Under Armour was able to break the barriers of
entry into the North American market due to their specialized antiperspirant clothing. The
problem is Nike and Adidas were quick to emulate this antiperspirant technology and distributed
it worldwide, thus Under Armour was unable to use their competitive advantage to expand
globally. To conclude, Under Armour should look to innovate and improve their sport marketing
across different global markets.

REFERENCES
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https://www.underarmour.com
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https://www.underarmour.com/en-ca/mens/tactical
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https://www.underarmour.com/en-us/troop-id-instructions
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